David J. Nims | Phone: 425-397-9814 | Fax: 425-397-0489 | nimsd@aol.com |
Under my agreement with Scenicsoft, I made an investment in the company in exchange for 5% equity interest. In addition, I was working on an incentive plan that, if realized, would result in my owning another 10%. However, it wasn't long after I joined Scenicsoft that I realized that they had clearly underestimated the magnitude of the job of completing the development of the imposition product, Preps. The PC version, which had been scheduled for release around the time I joined the company in September 1992, was way behind schedule. The Mac version, had the largest market potential, and had been scheduled for a March release the following year. Work on it had barely begun.
My plan when I joined Scenicsoft was to devote my time to developing additional OEM relationships, and I had started working on this. However, it soon became evident that Scenicsoft was headed for a cash shortage, and needed immediate action. Over the next 6 months I made additional investments in Scenicsoft, and acquired another 10% equity interest in the company. On the sales side, the discussions with other OEM customers were going well, but it was evident that each customer would require some custom features in order for Preps to be integrated into their workflow. Although the OEM agreements would partially fund this development, Scenicsoft still needed more funding to complete the work on the generic products, especially the MAC version.
By this time, it was clear to me that Preps would be a success. In addition to Orbotech, we had signed OEM deals with Xerox, Scitex, CREO, and Indigo. The needs of these customers would lead to explosive growth. We just had to survive until we could start delivering product to them. So I turned my attention to direct sales of the existing PC version of the product. We needed to sell at least 2-copies of Preps per week to keep the doors open. Erik Smith, the founder, President and majority owner, initiated discussions with other parties about making investments in Scenicsoft, but without the insight that we had into the business, the perceived risk was too high. Also, Erik was playing a key role in the development, and any time spent away from this would further delay the release of the OEM versions. So we stuggled on.
As we approached the time when the new products could be released, cash was really tight. Neither Erik nor I were taking paychecks, and the company could not cover my travel expenses, so the company's debt to me was mounting. In the final months, Erik could see the light at the end of the tunnel, so he even took the risk of not paying his payroll withholding taxes.
The stress was intense. I couldn't afford to continue making investments in Scenicsoft, and had more-or-less tapped out the easily available market for direct sales. My relationship with Erik began to deteriorate. Finally, Erik and I sat down and negotiated terms under which I would leave the company. This included payment terms for the outstanding money owed to me. The terms also included options under which Erik could buy back my equity interest in the company. I was confident the company could survive until cash flow went positive. Indeed they did, and when the OEM deals started bearing fruit, Scenicsoft became very profitable. Eventually, they repaid all the money owed me, with interest, and executed one of the options for repurchasing my equity interest in the company.
With the momentum provided by the OEM deals, Scenicsoft has become the leading supplier of imposition software, and had added other pre-print software products. It is recognized as one of the fastest growing small companies in the Northwest.